Commerce Commission to probe building materials sector: Grant Robertson

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Finance Minister Grant Robertson says the Commerce Commission will investigate the building materials sector after its supermarket investigation.

Speaking this morning to attendees at an event hosted by Deloitte and the BNZ at their offices at 80 Queen St in Auckland, Robertson indicated a strong political appetite to examine high building material costs.

Robertson said we pay “far too much for building supplies”.

During question time after his presentation, he was asked if the Government had a role in the building sector materials.

Robertson answered: “Certainly is. Those supply chain issues are global and they are going to continue.

“On the specific topic of building supplies, you do raise an issue which is in our work programme which is that New Zealand pays far too much for building supplies and you only need to look across to New South Wales/Victoria to see how different it could be.

“We’ve currently got the Commerce Commission having a good look at supermarkets and I suspect you will find the next cab off the rank might take us in the direction of that particular issue.”

Today’s comments follow Labour’s pledge last year to probe the sector. Labour said it would direct the commission to start a market study into supermarkets, followed by a study into building supplies late this year. Each study might take about a year to complete.

But Julien Leys, chief executive of the NZ Building Industry Federation, today said building materials were only one factor in high house prices.

Although he understood the political appetite for a commission investigation, it wouldn’t achieve what was hoped.

“We knew this was coming. They announced it at the start of the year. They said there were two big investigations: supermarkets and the building sector. We welcome an investigation in the sense that it will be a good way for us to show how competitive this market really is,” Leys said.

Building materials were available from a number of retailers including PlaceMakers, Carters, Mitre 10 and Bunnings, Leys said.

A spokesman for Fletcher Building said that business was also aware of a possible commission investigation into the building materials supply sector.

A market study had been announced last year, he said.

Fletchers owns Placemakers, one of the major retailers to the sector.

But it also has significant product category placement, including in wallboard which it makes as well as concrete and cement.

Leys said a 2018 study by Deloitte into the high cost of building homes in New Zealand was the most up-to-date and best document for examining the sector.

“That found that building materials only make up about 16 to 19 per cent of the cost of a new home,” he said citing other factors including the cost of labour, gaining territorial authority approvals and paying for inspections and contributions, as well as the high cost of land in many of our cities.

“The commission might focus on certain segments of the market because it wouldn’t be able to investigate all the approximately 800,000 building products,” Leys said.

The price of concrete, timber and resins or glues might be possible areas of focus, he said, although nothing had yet been announced.

“So the commission could ask why we pay more, or less, for these products.

“Will they find anything? I suspect not. It makes sense to ask though as it will be politically popular.”

The Deloitte paper said building materials are the second largest cost component of residential housing development in New Zealand, after land and infrastructure costs.

In New Zealand, building material costs represented between 16 per cent of overall residential housing development costs for a timber high-rise apartment unit in Auckland, up to 24 per cent for a townhouse in Wellington.

“If land and land development costs are excluded, [they represent] 23 per cent for a timber high-rise apartment unit in Wellington, up to 33 per cent for a low-rise in Christchurch,” Deloitte found.

In Australia, building material costs represented between 7 per cent for a low-rise apartment in Sydney and 22 per cent for a townhouse in Melbourne of total costs including land, Deloitte found.

The Productivity Commission has estimated we pay between 20-30 per cent more for building materials in New Zealand than they do in Australia.

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